Steel price drop may force shutdowns, job cuts

ArcelorMittal South Africa, the South African arm of the world’s largest steel producer, on Wednesday warned that if steel prices slid further it may be forced to look at shutting down facilities and cutting permanent staff levels.

The company has so far avoided lying off permanent staff although it has cut back on contract and hired labour.

Releasing the company’s first quarter results, CEO Nonkululeko Nyembezi-Heita told a newswires conference call that she could “simply cannot say” whether the company would be able to continue to protect permanent employment.

Nyembezi-Heita said that while we all hope for a better tomorrow, the business had to be managed for today.

She warned if steel prices continue to slide, the company would be forced to look at its facilities and if some and if these were shut down, this would have an impact on permanent staff.

The company reported a headline loss of R237-million for the first quarter of 2009, down from a profit of R2-billion for the same quarter last year and from a R1,14-billion profit for the fourth quarter last year.

This is the company’s first quarterly loss since it was unbundled mid-2001.

Nyembezi-Heita attributed the sharp reversal in earnings to the decline in demand and prices of steel and the persistence of high contract prices for raw material inputs, particularly coking coal.

Liquid steel production at 1,16 million tonnes was 26% lower than the first quarter last year but up 38% on the fourth quarter of 2008.

Production levels fell from around 80% of capacity in the first quarter last year to a low of below 50% in the fourth quarter as the company aligned the supply of steel to reduced demand levels.

The first quarter this year saw production pick up to levels of around 60% of capacity as the loss in sales on the domestic market was shifted to export orders.

Nyembezi-Heita said the company expected production to be at about 65% of capacity in the second quarter of 2009, but said she could not at this point make any guess as to what production levels would be for the second half of the year.

Results for the second quarter are expected to improve marginally.

At 11.26am shares in ArcelorMittal were trading 5,33% or R4 firmer at R79 on the JSE. — I-Net Bridge

Subscribe to the M&G

These are unprecedented times, and the role of media to tell and record the story of South Africa as it develops is more important than ever.

The Mail & Guardian is a proud news publisher with roots stretching back 35 years, and we’ve survived right from day one thanks to the support of readers who value fiercely independent journalism that is beholden to no-one. To help us continue for another 35 future years with the same proud values, please consider taking out a subscription.

Related stories

2019: The ones who left us

From Uyinene Mrwetyana, Oliver Mtukudzi to Xolani Gwala, Mail & Guardian remembers those who have passed on

More battles ahead for domestic worker unions

Florence Sosiba, speaks to the Mail & Guardian about how important domestic workers are and exclusion in the COIDA

“Life has been good to me, considering where I come from” – Xolani Gwala

Just over a year ago, veteran radio presenter Xolani Gwala’s cancer was in remission. He spoke to the Mail & Guardian once he was back on air.

Kanya Cekeshe’s lawyer appeals decision not to grant him bail to the high court

Kanya Cekeshe’s legal team filed an urgent appeal at the Johannesburg high court on Tuesday against Monday’s judgment by magistrate Theunis Carstens.

Leader’s principal aim to build IFP

Gravitas: Velenkosini Hlabisa brings his experience to his new post as leader of the Inkatha Freedom Party.

Police Minister Bheke Cele addresses Jeppestown

Police minister Bheki Cele visited Jeppestown on Tuesday to speak to business owners and community leaders.

Subscribers only

Toxic power struggle hits public works

With infighting and allegations of corruption and poor planning, the department’s top management looks like a scene from ‘Survivor’

Free State branches gun for Ace

Parts of the provincial ANC will target their former premier, Magashule, and the Free State PEC in a rolling mass action campaign

More top stories

Baby Awa: The miracle baby born on a boat fleeing...

More than 300 000 people in the north of the country have been displaced by militants who ransack villages and then burn them down.

Five suspects arrested in Senzo Meyiwa case

Police minister Bheki Cela announced on Monday that his team has arrested five suspects who were allegedly involved in the killing of former Bafana Bafana captain Senzo Meyiwa.

EFF eyes municipalities ahead of 2021 local government elections

EFF leader Julius Malema says the party is preparing to govern in many municipalities from next year. It is also launching a programme to defend the rights of farm workers

WSU suspends classes and exams to avoid the spread of...

The university says it has to take the precautionary measures because 26 students have tested positive on its East London campus

press releases

Loading latest Press Releases…

The best local and international journalism

handpicked and in your inbox every weekday